Address Verification Service (AVS)
Address Verification Service (AVS) is an anti-fraud tool offered by the credit card processing companies. AVS works by comparing name and address information given by the person claiming to own the credit card to the name and address on file with the credit card company.
When is AVS typically used?
Address Verification is used in all kinds of credit card transaction scenarios. It’s common in e-commerce and other card-not-present environments, as those settings have fewer alternative means of verifying a cardholder’s identity. But AVS can be used for card present transactions as well.
AVS is also one component in qualifying for enhanced data (level II and level III) transactions, such as those involving corporate or government cards.
Reasons to Use AVS
AVS acts as a fraud deterrent, saving you the difficulties of dealing with the repercussions of fraudulent transactions. Another reason to use the Address Verification Service is that it’s part of the required qualifications for lower cost interchange categories. That means that if you don’t use AVS, your transactions will downgrade, and will not be eligible for the lowest possible processing costs.
For e-commerce businesses, using AVS may help you defend against chargebacks. In Visa's merchant guide to chargebacks, the company indicates that merchants will be in a better position to fight chargebacks if you used AVS and received a "Code Y: street address and 5-digit zip code match" notification. Additional requirements such as signed proof of delivery of merchandise still apply, but AVS can add a layer of authentication to your chargeback response.
Declining Transactions Based on AVS Result
Payment gateways often allow you to set AVS filters to automatically reject transactions if they return non-matching AVS results. While you aren’t required to decline transactions based on the AVS result, it’s a good idea to look into the transaction further if you receive a mismatch. Popular payment gateway Authorize.Net suggests at a bare minimum that you exclude transactions that return an AVS code of N: neither street address nor zip code match.
In contrast, code Y responses mean that street address and 5-digit zip code match, which indicates transactions that are more likely to be legitimate.
How much does AVS cost?
Processors can choose whether or not to apply a per-transaction fee for AVS. Typical fees range for AVS from 1 cent to 10 cents per transaction, but this fee is variable by credit card processor. Further, processors can choose to apply the AVS fee to only certain transactions. It’s not uncommon for an AVS fee to be quoted, but waived if a majority of the business’s transactions are e-commerce (card-not-present).
MasterCard charges a very small assessment fee for AVS transactions, which is non-negotiable if you use AVS. Your processor does not have control over such assessment fees.
Is using AVS worth the cost?
The costs to use AVS are generally quite low, but address verification is one of the qualifying factors for lower priced interchange categories. If you don’t use AVS, your transactions can be subjected to a more expensive interchange category, costing you significantly more per transaction than the nominal AVS fees. And remember, if AVS can stop you from approving a single large dollar ticket (over $500), then the investment is well worth the cost.
When you use AVS, you’ll see a code returned by the credit card companies with the result of the verification. Here are the Address Verification Service may be returned to you:
Visa, MasterCard, and Discover
A – Street address matches, but zip code doesn’t match.
*For Discover cards only, code A indicates that Address and 5-digit zip code match.
B – Street address matches, but zip code could not be verified.
C – Neither street address nor zip code match.
D – Both street address and zip code match. (Also applies to code M.)
E – AVS data is invalid or not allowed for the card type.
G – Non-US-based issuing bank, does not support Address Verification.
I – Address could not be verified.
M – Street address and zip code match. (Same as code D.)
N – Street address and zip code do not match.
P – Zip code matches, but street address couldn’t be verified.
R – System unavailable.
S – US bank that doesn’t support address verification.
U – Address information unavailable. (In cases of a US bank that doesn’t support AVS for a non-US verification, or if the AVS in a US bank isn’t functioning correctly.)
W – Street address doesn’t match, but 9-digit postal code matches.
X – Street address and 9-digit zip code match.
Y – Street address and 5-digit zip code match.
*For Discover cards only, code Y means address only matches.
Z – Street address doesn’t match, but 5-digit zip code matches.
F – Cardholder’s name doesn’t match, but billing zip code matches.
H – Cardholder’s name doesn’t match, but street address and zip code match.
J – Cardholder’s name, billing address, and zip code match.
K – Cardholder’s name matches, but billing address and billing zip code don’t match.
L – Cardholder’s name and billing zip code match, but billing address doesn’t match.
O – Cardholder’s name and billing address match, but billing zip code doesn’t match.
Q – Cardholder’s name, billing address, and zip code match.
T – Cardholder’s name doesn’t match, but street address matches.
V – Cardholder’s name, billing address, and billing zip code match.
Whether you choose to implement automatic rejections for certain codes or manually review the details, using AVS can help prevent fraudulent transactions and expensive downgrades.